Gold prices set for longest winning run in 23 years, signal more upside

Gold rate: Gold prices are on the verge of seeing their longest winning run in 23 years. History suggests that if gold prices ended up higher for the month of June -- completing a six-month winning run, chances are higher that they may keep on rising in the years to come, and could even double from pevailing levels. 

At the end of May, gold prices were up for five straight months, a run that was last seen in May 2017. 

"If the metal is able to end above $3,289/ounce in June, it would complete a six-month winning streak, last witnessed in May 2002 or 23 years ago," Axis Securities said in a note.

The yellow metal is up 3 per cent in June and hit a record high of $3,432 per ounce this past week on safe haven demand amid Israel-Iran conflict. At last count, spot gold prices were trading at $3,378.74 per ounce, down 0.55 per cent.

In the last 75 years, an advance of that kind has only been witnessed 13 other times, Axis Securities said. The brokerage said 12-month forward prices in those instances were up 85 per cent of the time with an average return of nearly 50 per cent. 

"Two years ahead, the win-rate was similar, but the average jump was nearly 100 per cent. The  takeaway here is that the six-month winning streak has been a solid signal for long-term investors to allocate more of their wealth to gold as the purchasing power of the dollar erodes, in turn triggering the slow but evident process of global de-dollarisation," it said.

Axis Securities said short-term gold prices are primed to reach the $3,600-$3,800 zone and it advised swing traders to book profits at those levels since the dollar is likely to reverse its decline. 

"On the downside, $3,245 is critical – anything under that, and a  bigger drop below $3,000 becomes a real risk. In summary, all eyes on $3,289 for between now and month-end. Long-term, the answer to the question, “should the yellow metal find more space in an  investor’s wallet?” is a resounding yes," it said.

Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities said the underlying tone for gold remains positive, supported by uncertainty and geopolitical risks. 

"Going forward, market participants will closely monitor three major triggers: US Federal Reserve’s interest rate decision Geopolitical developments between Iran and Israel," he said.